Tag Archives: Fraud

Picture a world where sophisticated machine-learning algorithms generate hyper-realistic video footage of you doing things you’ve never done and saying things you’ve never said.

If that sounds like a nightmare, I’ve got bad news for you. That world is increasingly our world. Those videos, called “deepfakes,” are already being created, often for unsavory purposes.

(You can watch a deepfake video of former president Obama giving a fake speech here.)

Anyone can download the software needed for DIY deepfake videos. And even though deepfake technology hasn’t yet been perfected, it’s getting better every day.

This has obvious implications for national security. Indeed, congressmen have already expressed concerns about the use of deepfakes as weapons of international intrigue.

What about insurance – could deepfakes be the next frontier of risk? It’s not hard to imagine some scenarios:

Cyber: A deepfaked audio recording of a CFO directs a company’s billing department to route thousands of dollars to a fake bank account.

Directors and officers: A deepfake video is created of a large corporation’s CEO reporting (fabricated) negative financial results, leading to a significant drop in the company’s stock.

Employment-practices liability: An employee is “deepfaked” to portray him making disparaging remarks about coworkers and engaging in harassment.

General liability: Someone creates a deepfake video of a person slipping in a grocery store and “injuring” herself, leading to allegations of negligence.

I’m sure you could think of a hundred more like these. How will we adapt to a world where video and audio can’t be trusted to tell the truth? What if deepfakes become too sophisticated to detect – how will this impact insurance claims and fraud prevention?

If the worst comes to pass, deepfakes could soon become an insurance nightmare.

But if you’re not careful, what happens after the storm can be just as harmful as the hurricane itself.

Beware the shady contractor. It’s a terrible story: someone’s home is damaged from a hurricane. A contractor shows up at their property and offers to complete immediate emergency repairs. All the homeowner needs to do is sign some paperwork and, the contractor assures them, their insurance company will pay for the repairs – easy as that!

Wrong. Shady contractors are not your friend. If you live in Florida, then the paperwork they want you to sign is often an “assignment of benefits” (AOB), a document that gives the contractor the right to receive payouts from your insurance company directly for repairs. (You can read all about how it works – or doesn’t work, as the case may be – on the Florida state website.)

Fraud is real and rampant. In the worst-case scenario, the shady contractor makes minimal or no repairs to the person’s home at all, but they’ll file a large claim with the insurance company anyway. If the fraudster is lucky, they’ll get the insurance payout and skip town. Meanwhile, the house is still ruined, and the homeowner didn’t get help to fix it.

Your home could go unrepaired for weeks, even months. Or the shady contractor will do unnecessary repair work, like ripping apart the kitchen because of “potential mold damage.” He promises to re-install the kitchen – but in the meantime, he bills the insurance company and the insurer pays. Sometimes, the contractor won’t reinstall the kitchen, often on some pretext or other.

This has especially been a huge problem in Florida. You can read some AOB abuse horror stories on the Consumer Protection Coalition website.

There are a lot of scams out there. Not all shady contractors are using AOBs. The Florida Department of Financial Services has also issued warnings about fraudsters who offer to provide repairs for cash – and then never provide repairs.

Talk to your agent before signing anything. Never, ever sign anything before you talk to your insurance company. Especially not if a contractor is putting up red flags, like pressuring you into signing an AOB or demanding large repair deposits up front. Contrary to what the contractor might say, you do not need to sign an AOB to get your home repaired or your insurance claim processed.

Instead, call your insurer. Many insurers will dispatch approved companies to complete emergency repairs on your property. And you’ll still be in control of your insurance policy, which hopefully will make you whole again. No shady contractors needed.

This post is was submitted by Lynne McChristian and Janet Ruiz, the I.I.I.’s Florida and California representatives.

Natural disasters (such as a flood, earthquake, hurricane or tornado) sometimes invite another type of disaster: “Storm Chasers” who try to profit from others’ unfortunate circumstances. These profiteers take many forms – from workers posing as qualified contractors to “volunteers” trying to help only themselves to lawyers and public adjusters offering to take over your claim. If you start having second thoughts about anyone who has offered assistance after disaster strikes, here are some tips to get you back on course:

Never feel pressured to make a decision.
While the need to recover quickly is understandable, do not succumb to a high-pressure sales pitch. If you’ve signed an agreement or contract, remember the Federal Trade Commission has rules protecting consumers that allow you to cancel a contract up until midnight of the third business day after entering into it. This applies to door-to-door sales contracts for more than $25, as well as sale contracts for more than $25 made at any place other than a seller’s usual place of business. Additionally, states have similar rules to help consumers having second thoughts on the contracts they’ve signed.

Think carefully about signing over your claim to an outsider.This may sound like a good idea, since it appears to free you from handling the details of disaster recovery. However, what often happens when a third-party (which can be a contractor or public adjuster) takes over your claim is that you lose control of it and repair costs may be greatly inflated, delayed or not in compliance with building codes. The desire to get the job done right the first time makes a good case for the homeowner to stay involved in the process.

Always deal with a licensed, insured contractor for both temporary and permanent repairs.
Be certain to have a pro handle your job. Unlicensed individuals may actually cause more damage to your property. And, if they are injured on your property, they may hold you liable if they do not have their own insurance. You can request to see their license and verify it with state or county officials. Unlicensed contractors can be reported to your state’s licensing board. Keep receipts for temporary repairs, as your insurer will reimburse you for these expenses.

Know that your insurer is an on-call advisor to help you through every step of the claims process.
Home and business insurance policies comes with claims services, so consult your insurer as soon as possible after disaster strikes. Disaster claims are handled based on the severity of damage, so those most impacted get priority. That is why it is important to provide an accurate preliminary account of the damage when you make the initial call to your insurer. Also, be sure to mention any circumstances that may necessitate expedited claims handling, such as special needs situations. Contact the department of insurance in your state if you have complaints.

Report the scam to local police and your state insurance department.These scams can happen to anyone, so don’t hesitate to contact authorities. Many states also have consumer affairs departments to assist you in answering questions, protecting your interests and filing charges, if necessary.

While natural disasters have the unique ability to unify people, it is important to stay cognizant of scams and fraud that follow.

PropertyCasualty360 addressed potential scams in this article, noting that hurricane relief fraudsters are some of the first to appear after a storm. One way to avoid scams is to donate strictly to well-known reputable organizations such as the Red Cross or Direct Relief. The Insurance Industry Charitable Foundation has a Hurricane Harvey disaster relief fund as well.

Affected homeowners should be wary of who they let into their home for repairs. Regulators in Florida are warning consumers not to sign Assignment of Benefits (AOB) forms to get repair work started.

FEMA has launched this page with information on disaster relief and how affected individuals can prepare for the arising fraudsters.

Bitter cold and snow may be in the air for some this Valentine’s weekend, but there’s no better way to stay warm than by checking out these Valentine-themed messages from around the risk and insurance community.

First up, the Insurance Information Institute (I.I.I.) reminds us that while there is nothing more romantic than a marriage proposal on Valentine’s Day, getting adequate insurance for that ring will ensure you are financially protected.

Next, did you know that every year, thousands of Americans lose billions of dollars by falling victim to romance scams? The Financial Services Roundtable (FSR) warns that nearly every demographic is at risk, but the people who are most susceptible are the elderly and women over 40 who are divorced, widowed or disabled.

Among the most common romance scams are malicious actors (scammers) who create fake profiles on dating websites and establish relationships with other site members in order to scam them out of money.

Check out this story of the Emoji prince who thinks he’s found true love online, but soon becomes a victim of a romance scam narrated by FSR’s director of fraud risk, Roxane Schneider.

Finally, if you’re looking to heat up your romance…or your house…by lighting candles this weekend, the National Fire Protection Association (NFPA) has some timely candle fire safety tips to consider.

From 2009-2013, U.S. fire departments responded to an estimated 9,300 home structure fires that were started by candles, causing 86 deaths, 827 injuries and $374 million in direct property damage.

On average, 25 home candle fires were reported per day over the five-year period, according to the NFPA.

In a poll of 2,000 adults in the UK, one-in-five (20 percent) admit to lying to their insurance company, despite a separate 82 percent knowing that wrong information registered on an insurance form can render the policy invalid.

Why do people lie to their insurer? The reasons are varied:

– 29.3 percent lie because they are unsure of the correct information or didn’t understand the process to begin with;
– 10 percent knowingly lie because they are scared of the consequences of being totally truthful;
– 8 percent even admit to lying as they don’t take the process seriously.

Despite these numbers, the poll also revealed 87 percent of people would not lie to an official body, such as the police or their accountant, in order to save money.

Maybe insurers should take note that 32 percent of Brits are more comfortable lying online than over the phone, while 34 percent will lie to put a positive spin on a bad situation, and another 10 percent will lie about their weight.

Covering the period from January 1, 2008, through June 30, 2012, analysts reviewed 13,014 questionable insurance claims.

Questionable claims (QCs) are claims that NICB member insurance companies refer to NICB for closer review and investigation based on one or more indicators of possible fraud. A single claim may contain up to seven referral reasons.

For this report, just QCs with a referral reason of Ã¢â‚¬Å“organized group/ring activityÃ¢â‚¬  (OGA) were identified.

Overall, there were 13,014 OGA QCs referred to NICB during this period. The top five states that generated the most were: Florida (3,530), California (2,679), Michigan (1,080), Texas (1,050) and New York (765).

The top five cities generating the most were: Los Angeles (752), New York (595), Miami (575), Detroit (545) and Tampa (545).

The insurance policy type most represented in the NICB analysis was Ã¢â‚¬Å“personal automobile,Ã¢â‚¬  accounting for 10,659 referrals. NICB says:

Further proof of this connection is evident when looking at these QCs by loss type. The referral reason most often coupled with the OGA referral was by far Ã¢â‚¬Å“staged/caused accidentÃ¢â‚¬  Ã¢â‚¬” indicated 4,347 times. The loss type with the most referrals was bodily injury with 4,401 referrals.

The NICB defines organized crime groups as Ã¢â‚¬Å“any specific group made up of entities and/or individuals who systematically and repeatedly conduct pre-planned activities for the purpose of generating fraudulent insurance schemes.Ã¢â‚¬ 

Staged/caused accidents are perpetrated by individuals who are skilled in committing insurance fraud. Those Ã¢â‚¬Å“accidentsÃ¢â‚¬  set the stage for subsequent acts of fraud ranging from faked or exaggerated injuries to unnecessary or excessive medical treatment.

Check out this I.I.I. backgrounder for more info on no-fault insurance fraud, and insurance fraud in general.

ItÃ¢â‚¬â„¢s been commonly understood that insurance fraud accounts for up to 10 percent of property/casualty insurance industry losses, but a new survey of U.S. insurers indicates that fraud may be much more prevalent.

The survey also found that more than half (54 percent) of insurers expect to see an increase in the cost of fraud this year on personal insurance lines, while less than three percent of insurers expect to see a decline in the cost of fraud on personal lines.

Insurers responding to the survey said they expect the most significant increase in the cost of fraud will affect personal property, workersÃ¢â‚¬â„¢ compensation and auto insurance. The majority (61 percent) attribute the increases in fraud to sustained economic hardship by policyholders.

While only 17 percent of insurers attributed the expected increase in fraud to a rise in the sophistication of criminal gangs, 60 percent expect a rise in workers compensation fraud rings, and 61 percent expect a rise in auto fraud rings.

The survey also found that 76 percent of insurers believe there is increased risk of fraud in no-fault states compared to states with tort systems.

When asked about fraud-fighting initiatives that can have the greatest impact on insurance fraud, predictive analytics was identified as the most effective by 45 percent of respondents.

Insurers also included the use of anti-fraud teams for specific books of business (37 percent), link analysis for detecting fraud (31 percent), business rules for stopping known fraud types (29 percent), and external databases (29 percent) as other useful approaches to fight fraud.

Elements of fraud appeared in 10 percent of all Florida no-fault auto insurance claims Ã¢â‚¬“ known as personal injury protection (PIP) claims Ã¢â‚¬“ closed in 2007, according to the IRC.

Almost one in every three no-fault auto insurance claims closed in Florida in 2007 appeared to involve the exaggeration of an injury or to be inflated by unnecessary or excessive medical treatment. The IRC sums up the problem:

The IRC found that average no-fault claim losses per insured vehicle grew 55 percent in just the last two years, from $100 in 2008 to $155 in 2010. Claim fraud and abuse were major factors in that growth.

Some 30 percent of Florida claims appear to involve either overbilling or excessive utilization of medical services, known as claims buildup.

I.I.I. analysis recently found that no-fault fraud has already cost Florida vehicle owners and their insurers an estimated $853 million since 2008. The cumulative costs from 2009 through 2011 could exceed $1.5 billion if current trends continue.

Elements of fraud appeared in 22 percent of all NYC metro area no-fault auto insurance claims (known as personal injury protection (PIP) claims) closed in the fall of 2010, while another 14 percent appear to involve either overbilling or excessive utilization of medical services.

In contrast, when IRC looked at PIP claims filed in the rest of the state, only 4 percent of closed claims appeared to be fraudulent, while signs of claims buildup were seen in just 4 percent of upstate PIP claims.

Auto injury claimants in the NYC area are seeing more doctors and going for more visits.

The IRC found that some 44 percent of NYC area PIP claimants visited four or more health care providers in 2010, whereas only 14 percent of claimants elsewhere in the state did the same.

NYC claimants were also much more likely to seek treatment from chiropractors, physical therapists, and acupuncturists than their upstate counterparts.

The typical PIP claims payout for claimants in the NYC area in 2010 was nearly double the payout for claimants in the rest of the state.